Pine Street Associates, L.P. v. Southridge Partners, L.P.Pine Street Associates, L.P. v. Southridge Partners, L.P.
Becker & Poliakoff, LLP, New York City (Lance Gotthoffer of counsel), and Reed Smith LLP, New York City (Gil Feder and John L. Scott, Jr. of counsel), for appellant.
Robinson Brog Leinwand Greene Genovese & Gluck, P.C., New York City (Lawrence S. Hirsh of counsel), and Moses & Singer LLP, New York City (Steven R. Popofsky and Jason Canales of counsel), for respondents.
OPINION OF THE COURT
Acosta, J.
The primary issue in this case is whether the tender of secu
In 2005, petitioner Pine Street Associates, L.P., invested approximately $8.3 million in the fund. In 2008, Pine Street requested a “full redemption” of its investment from Southridge, effective December 31, 2008. Under the terms of Southridge’s Sixth Amended and Restated Limited Partnership Agreement (the agreement), withdrawal of a limited partner occurs upon the partner’s request for redemption of all of its interest. Southridge acknowledged Pine Street’s request and reported that the value of Pine Street’s distributive class of interest at redemption was approximately $8,076,457.85. In March 2009, Southridge informed Pine Street of its decision to postpone redemption of Pine Street’s class of interests pursuant to section 7.2 (f) of the agreement.1
In April 2009, Pine Street filed a demand for arbitration, alleging that Southridge engaged in bad faith in failing to honor its request to redeem. Following a two-day arbitration hearing, the arbitrator rendered an award, dated January 18, 2010, interpreting the agreement as permitting Southridge to exercise its discretion as to when to redeem “only . . . under certain defined circumstances and [if] exercised reasonably in good faith.” The arbitrator then found that “[Southridge] failed to establish a credible evidentiary basis for the existence of those defined circumstances, or the reasonableness of their exercising discretion, that delayed the redemption of [Pine Street’s] interest then or now.” On the basis of that finding, the arbitrator rendered the following award in favor of Pine Street:
“1. Notwithstanding any other provision of the Agreement, (a) within thirty (30) days from the date of this Award, [Southridge] shall redeem no less
than forty percent (40%) of the balance of [Pine Street’s] interest in [the fund] in cash; and (b) within ninety (90) days from the date of this Award, [Southridge] shall complete the redemption of [Pine Street’s] interest in [the fund] in cash or in kind, plus interest at the legal rate on said balance then remaining from October 1, 2009, until paid in full. “2. Within forty five (45) days from the date of this Award, [Southridge] shall provide [Pine Street] with an accounting of [Pine Street’s] interest and position in [the fund] (represented to be $8,079,457.85 [sic] as of December 31, 2008) from January 1, 2008, to said date.”
On February 17, 2010, in compliance with paragraph (1) of the arbitration award, Southridge paid Pine Street $3,195,064 in cash, representing approximately 40% of the stated value of Pine Street’s remaining interest in the fund ($7,987,660.19).
On April 20, 2010, Southridge also transferred a variety of stock certificates (whose value is disputed) to Pine Street. In a cover letter, Southridge informed Pine Street that it had delivered the stock certificates, “almost entirely” completing the redemption of Pine Street’s interest in the fund in kind. The letter also stated that “[a]n additional certificate, representing only a single-digit percentage of the remaining redemption value [would be forwarded] shortly. Upon such delivery, the award will have been satisfied in full.” On May 27, 2010, Southridge assigned to Pine Street a portion of its rights, in the amount of $151,258.80 plus interest, in a promissory note due December 31, 2009, and in two stock certificates, each for 500,000 shares in Akers Biosciences, Inc.
On or about November 24, 2010, approximately 10 months after the arbitrator issued the arbitration award, Pine Street filed a petition to confirm the award and for entry of judgment. In response, Southridge argued that the motion was belated, and that because it had satisfied the award some time before, confirmation was unnecessary. Pine Street did not dispute Southridge’s representation that the award had been paid in full. Supreme Court granted the petition to confirm the award, and on May 12, 2011 entered judgment.
By order to show cause dated May 18, 2011, Southridge moved to enjoin and restrain Pine Street from seeking to enforce the judgment entered, “unless and until the Court determined that the judgment has not in fact been satisfied and has delineated the terms and conditions of any such enforcement.” Southridge
Supreme Court granted a temporary restraining order on May 18, 2011, enjoining Pine Street from seeking to enforce the judgment. By order dated September 7, 2011, the court granted Southridge’s motion to enjoin Pine Street from enforcing the judgment pending the determination as to whether the award had been satisfied (2011 NY Slip Op 33643[U] [2011]). The court first noted that Southridge’s motion did not seek a ruling whether it had already satisfied the judgment, although it evidently intended to seek such a ruling, and that “Pine Street never questioned the adequacy of Southridge’s payments in satisfaction of the award, either before the arbitrator or before this Court, until about a year after those payments were made” (id. at *3). The court further found that “the securities that would satisfy the in-kind portion of the judgment should have been 60% of Pine Street’s security interests in [the fund] as of January 18, 2010” since the in-kind portion “did not specify that the securities had to equal a particular dollar amount” (id. at *4). Having defined “in kind” in that manner, the court concluded that the record was insufficient to determine whether the securities rendered by Southridge in the spring of 2010 represented at least 60% of Pine Street’s interests in the fund as of January 18, 2010. The parties were directed to settle an order and appear for a conference on October 6, 2011. Pine Street thereafter filed a notice of appeal.
In a letter dated September 28, 2011, Pine Street, through its attorney, communicated to the court that, “with a full reservation of all of its rights,” it did not intend to further litigate the issue of whether Southridge had complied with the court’s directives, i.e., satisfied the arbitration award, but would pursue its position on appeal. On October 6, 2011, the court held a conference during which the parties agreed that a satisfaction of judgment should be entered and the case closed, subject to any determination made concerning the order on appeal. On the same
As a threshold matter, we begin by observing that a party may oppose an arbitral award either by motion pursuant to
Where a dispute exists as to the meaning of an arbitration award that has been confirmed in a judgment, it becomes “the Court’s function to determine and declare the meaning and intent of the arbitrator[ ]” (Board of Educ., Farmingdale Union Free School Dist. v Farmingdale Fedn. of Teachers, 92 AD2d 599, 601 [2d Dept 1983] [internal quotation marks omitted]). To that end, a court may review the text of the arbitrator’s award in conjunction with whatever findings, if any, the arbitrator has made (see id.; International Assn. of Machinists, Lodge 917 v Air Prods. & Chems., Inc., 341 F Supp 874, 877 [ED Pa 1972]). In so doing, a court should adopt the most reasonable meaning of the text by avoiding any potential interpretations of the award that would render any part of its language superfluous or lead to an absurd result (cf. Matter of Tamaron Invs. [Raia], 167 Misc 2d 125, 128 [Sup Ct, NY County 1996]; New York City Omnibus Corp. v Quill, 189 Misc 892, 894 [Sup Ct, NY County 1947], affd 272 App Div 1015 [1st Dept 1947], affd 297 NY 832 [1948]). Furthermore, the award must be interpreted in the light most favorable to the prevailing party (see D.E.I., Inc. v Ohio & Vic. Regional, 296 F Supp 2d 881, 885 [ND Ohio 2003], affd 155 Fed Appx 164 [6th Cir 2005]).
Here, there is no dispute that the award was satisfied in part. Southridge made a $3.1 million cash payment in fulfillment of its obligation to pay “forty percent (40%) of the balance of [Pine Street’s] interest in [the fund] in cash.” What is at issue is
The arbitral award makes clear that the arbitrator found that the balance of Pine Street’s interest in Southridge, after Southridge made a partial redemption of $88,797.66, was $7.9 million. Significantly, the arbitrator emphasized specific dollar amounts in the award. Nowhere did he equate Pine Street’s interest with a certain amount of stock.2 Thus, Supreme Court’s conclusion that Pine Street’s interest consists of a certain amount of stock was in error.
Supreme Court also erred by finding that the term “in kind” did not have to equal a certain dollar amount. The term “in kind” has a well defined legal meaning: “[i]n a similar way; with an equivalent of what has been offered or received” (Black’s Law Dictionary 857 [9th ed 2009]). Given that the arbitrator defined Pine Street’s interest in Southridge as a fixed dollar amount equaling around $7.9 million redeemed and that Southridge owed 60% of that amount, it is inconceivable, viewing the award in the light most favorable to Pine Street, that an award in Pine Street’s favor would allow Southridge to pay Pine Street less than 60% of $7.9 million. The patently absurd result would be to give Southridge the choice of paying $4,792,596.11 (along with legal interest on that amount) in cash or far less than that “in kind.” We do not believe that that is the result intended. Rather, we conclude that Southridge was given the option of redeeming Pine Street’s interest by tendering either $4,792,596.11 (along with the corresponding legal interest due on that amount) in cash or an amount of whatever stock it held that would equal $4,792,596.11 (along with the corresponding amount of legal interest due on that amount).
We note that Supreme Court expressed concern that Pine Street waited one year after Southridge made the payments and the transfer of securities—i.e. until the award had been confirmed—to claim that the award had not been satisfied. However, Pine Street had the right to decide when to bring its confirmation action within the statute of limitations period.
Accordingly, the order of the Supreme Court, New York County (Bernard J. Fried, J.), entered October 6, 2011, which, in this
Tom, J.P. (dissenting). The culmination of more than two years of litigation that followed the arbitration award rendered in this proceeding is a judgment in favor of petitioner in the total sum of $505.1 This is an anomalous outcome in a dispute concerning the redemption of an investment account assessed by the parties at some $8 million. The paltry judgment results from the absence, in the arbitration award, of any valuation of the securities held in the investment account on which judgment could be entered.
This omission is not the consequence of any inadvertence by the arbitrator, but rather results from his recognition that a monetary award was beyond his power to make—because
If the award is construed as requiring payment of a particular amount, as the majority holds, then the award is in excess of the arbitrator’s power, because the issue of valuation was not submitted for his determination, and since the award neither identifies the securities that will satisfy respondents’ obligations to petitioner nor establishes any value that those securities must have, it represents so imperfect an execution of the arbitrator’s authority that no final and definite award on the subject matter was rendered (
At the outset of the hearing, the arbitrator briefly addressed petitioner’s claim, noting that “they weren’t seeking a particularly monetary [sic]—I know that causes a problem that I got to dance around and deal with.” Later, he reminded the participants that
“there is a different problem here that everybody has been tap dancing around for good and sufficient reason because, one, it shouldn’t be on the record and, two, it is not before me.
“But the elephant in the room is the value that was placed on the position and who and why. That is the elephant in the room. And you have—I congratulate both counsel for that, avoiding the elephant in the room . . . you’ve made sure that that’s not in front of me . . . .”
Thus, it is clear that the arbitrator recognized that the question of the valuation of petitioner’s interest in the investment fund was not before him and that he lacked the power to determine the issue.
It is well settled that an arbitrator may not rule on a matter not submitted for determination (Matter of Joan Hansen & Co., Inc. v Everlast World’s Boxing Headquarters Corp., 13 NY3d 168, 173 [2009]). It is axiomatic that if an issue was not ruled upon by the arbitrator, a court cannot, under the guise of confirmation pursuant to
As the Court of Appeals has observed, arbitration is favored and encouraged to promote the announced policy of conserving judicial resources, as well as the time and resources of the parties to the arbitration agreement. Consistent with this policy, the courts are accorded only a limited role in the arbitral process. To avoid becoming embroiled in issues collateral to the dispute that the parties have agreed to arbitrate, the courts are admonished “to prevent parties to such agreements from using the courts as a vehicle to protract litigation” (Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co. of Am., 37 NY2d 91, 95 [1975],
With respect to vacating an award as nonfinal or indefinite, the Court of Appeals has stated, “An award is deficient in this regard and subject to vacatur only if it leaves the parties unable to determine their rights and obligations, if it does not resolve the controversy submitted or if it creates a new controversy” (Matter of Meisels v Uhr, 79 NY2d 526, 536 [1992]). The award rendered in this matter directs respondents to pay 40% of the value of petitioner’s interest in the investment fund in cash within 30 days of the date of the award and 60% “in cash or in kind” within 90 days. The parties dispute whether securities transferred to petitioner as in-kind payment of its 60% interest are of sufficient value to discharge their obligations under the award. Because the award neither provides guidance as to the value of the in-kind transfer nor indicates the arbitrator’s intent as to the identity and number of the securities petitioner is to receive, the award fails to resolve their dispute and, further, creates a new controversy concerning whether respondents have satisfied their responsibilities under the judgment entered on the award. Thus, it is deficient and subject to vacatur.
Accordingly, I would vacate the judgment confirming the award and the judgment entered thereon.
Andrias, Saxe and Freedman, JJ., concur with Acosta, J.; Tom, J.P., dissents in a separate opinion.
Orders, Supreme Court, New York County, entered October 6, 2011 and September 12, 2011, reversed, on the law, and the matter remanded for a hearing to determine the value of the stock tendered to petitioner by respondent Southridge Partners, L.P., and for entry of a money judgment in petitioner’s favor in the amount, if any, of the difference between the value of the stock as determined and the corresponding legal interest that Southridge was obligated to pay petitioner within 90 days of the issuance of the January 18, 2010 arbitration award.